Tech tools for faster mutual fund applications
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A few months ago, at the beginning of 2014, A. Balasubramaniam, chief executive officer, Birla Sun Life Asset Management Co. Ltd, was at his village, Melattur, in the Thanjavur district of Tamil Nadu. He wanted his mother to invest in one of the fund house’s mutual fund (MF) schemes. But the AMC’s nearest branch was in, Tiruchirappalli, more than an hour away. So, a sales staff member came to the village armed with a tablet and an app that allows the distributor or sales official to take pictures of the application form and upload it. As soon as the form gets submitted, the investment gets submitted. Balasubramaniam said his mother’s investment was processed in “20 minutes flat”.
Tablets and apps are just one of the ways that MFs are using technology to increase their reach. The capital market regulator, Securities and Exchange Board of India regulations now allow all fund houses to offer extra incentives to distributors to solicit investments from Beyond the Top 15 (B15) cities.
Many fund houses also reach out to customers using online platforms and stock exchanges such as BSE Ltd. Computer Age Management Services Ltd (CAMS), one of India’s largest registrar and transfer agents (R&T) for mutual funds, now offers three more tools—CAMS Slate, CAMS Swift and CAMS Scribe. “These will go a long way in facilitating distribution of MFs beyond urban locations and into tier II and tier III cities,” said N.K. Prasad, president and chief executive officer, CAMS.
The use of technology is important in speeding up the investment process in a fund. Theoretically, you can invest in MFs till 3 p.m., which is the cut-off time for all equity and debt schemes, except liquid funds. But in reality, many distributors accept forms only till 1 p.m. or 2 p.m., so that those forms can be submitted with the R&T by 3 p.m. Any later than this and only the next day’s net asset value (NAV) will apply. Innovations like CAMS Slate can help here.
It’s an app on a tablet that can accept and electronically submit forms to the R&T’s office. An MF sales official or a distributor can use it. After you fill out the physical MF application form, your distributor takes a picture of it using the app, uploads and transfers them to the R&T data servers. Within seconds, the application is accepted and time-stamped. This means your distributor or the sales official from your MF could submit your application till as late as few seconds before 3 p.m.
An existing investor can use the app to see current holdings, invest addition amounts, switch or even redeem. The distributor can also check your know-your-client (KYC) status. If you are not KYC compliant, you can upload your documents through this app.
The second tool, called CAMS Swift, is actually a small device, which comes with a camera and a SIM card. Apart from being able to perform the functions of CAMS Slate, this tool does two more things. It can accept debit cards though a swipe slot, and generate a receipt. “This device helps distributors collect small investments, especially those in cash,” said Prasad. At present, MF regulations allow investors to invest up to Rs.50,000 a year in cash. But if you want to do so, you need to go to the bank to deposit the money in the MF’s bank account, and get a receipt for it. This has to be attached with your MF application form and given to the distributor.
A distributor who has the CAMS Swift device can accept cash investments along with the investment form. She has to take a picture of your application form, and submit it using the Internet. The device will generate a receipt.
What is the guarantee that the cash is actually going to the MF? “The receipt is proof. It contains details of the transaction. The distributor can be traced using it. Besides, the fund house is expected to do the due diligence on the distributor and be satisfied with her credentials before empanelling her,” said Prasad.
The third tool, called CAMS Scribe, is a specialized pen that the distributor can use to fill out application forms. As she fills out the specially made form, the pen captures the information. The distributor then puts the pen on a special dock, which transmits the data via the Internet.
Better solutions needed
Among other things, these devices are meant to save time that is usually taken by the distributor to make it to the R&T’s office (in this case, CAMS’). “It doesn’t just help distributors who live in the hinterlands of India. It also helps those who work on the fringes of major city limits. Even in a city like Mumbai or Delhi, commuting takes a lot of time. These devices—because they can generate instant time-stamping— save a lot of time,” said Amit Trivedi, an MF trainer.
Even with these devices, the distributor or sales official still needs to submit the physical form, eventually. Cams told us that it is working towards paperless transactions.
Mint spoke to a number of CAMS’ serviced fund houses to gauge their reaction to these tools. One of the concerns was lack of connectivity. “How are they going to ensure that if somebody is sitting with a customer and ready to upload the forms, the connectivity will be there?” said D.P Singh, chief marketing officer (domestic business) at SBI Funds Management Co. Ltd, adding that he expects the devices to resonate well with young distributors, who are more willing to embrace technology. SBI AMC has submitted its feedback to CAMS, said Singh.
The head of a fund house told us, on conditions of anonymity, that they were yet to evaluate these products. “We will consider them only if they increase distributor efficiency,” he said.
Conversations with AMCs also brought forth a basic aspect. Though these devices, especially CAMS Slate and CAMS Scribe, aim to process investments faster just so to be able to give the same day’s NAV, for a long-term product like an equity fund, getting the same day’s NAV is not crucial. So, the biggest worry it seems is the cost involved. For instance, while CAMS said it was working out the costs of these devices, a senior official of a fund house said that at present a CAMS Scribe pen costs around Rs.15,000. Of course, the cost may come down if more fund houses and distributors use the devices.
Balasubramanian said that Birla Sun Life AMC had experimented with one such pen back in 2009, but the distributors found the device “cumbersome”. “We had started a pilot project. But it did not work out because the forms required are also different, and distributors did not want to carry just that pen only for Birla MF when they were also selling for other fund houses. Plus, the special paper cost us and, therefore, not worth it. Eventually we did not launch,” he added. Cams Scribe requires a special kind of paper on which the application form has to be printed.
Some fund houses we spoke to also raised concerns over distributors’ willingness to carry some of these devices. Executives of at least four AMCs told us that either they haven’t yet seen and discussed these devices internally, or aren’t interested right now.
For sure these are early days. CAMS is still working with the MF industry to decide how these products can take off and at what cost. For the investor, it doesn’t really matter which of these tools your fund house takes on. What’s important is that the MF industry adapts to technology as fast as it can, so that like Balasubramanian’s mother in Thanjavur, you, too, are able to invest irrespective of where you live in India.